Perspectives Blog

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…ed up, and is now four tenths above its level in December. Average hourly earnings growth also slipped to 2.1% year-over-year. However, we would caution against reading too much into a single jobs report. Based on demographic trends, we estimate that “breakeven” payroll growth—the amount needed to lower the unemployment rate—is around 75-100k per month. If job growth continues around 200k per month, it’s very likely the unemployment rate will kee…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

…h student debt. This was underscored recently by a New York Fed study* which showed that young people with student loans were much less likely to invest in houses than those without loans, which is a reversal of pre-recession trends. They believe this is one reason why the housing recovery has not been stronger. When you restrict credit in the midst of a 100 basis point rise in interest rates and a 13% jump in home prices, affordability is invari…

Retail sector outlook – It’s a share game

Mari Shor, Senior Equity Analyst | March 17, 2014

expenditures) versus non-durables. Even within non-durables categories, the ongoing spending shift towards accessories and away from apparel can be expected given less favorable weather through summer, less democratic fashion trends in the marketplace and a lack of seasonality in consumers’ wardrobes. With both structural and cyclical headwinds facing many apparel retailers today, we believe that global brand strength and supply chain expertise w…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…

Gaps, not growth

Zach Pandl, Portfolio Manager and Strategist | February 25, 2014

…l: Output Gap = β * (GDP growth – Potential GDP growth) where beta is the Okun’s Law coefficient. The relationship is also commonly written in terms of the unemployment gap—the difference between the unemployment rate and its structural rate. Okun’s Law is at the center of today’s biggest policy debate. Since the recovery began in the second half of 2009, GDP growth has increased at an average annualized rate of just 2.4%. Before and during the r…

When the QE tide recedes, focus on what is revealed

Robert McConnaughey, Director of Global Research | January 6, 2014

…has reasserted itself on the global stage with the bold economic policies that have become known as “Abenomics.” Abenomics has been described as having “three arrows”: 1) aggressive monetary easing, 2) fiscal stimulus and 3) structural reforms. Japanese markets responded extremely favorably to the competitive boost the economy has received from heavy doses of the first arrow and some small measure of the second arrow in 2013. However, the market…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

Today’s low unemployment rate indicates modest slack in labor market, which implies earlier Fed rate hikes and/or more inflation risk. The decline in labor force participation in recent years now looks mostly structural. Investors should remain cautious around U.S. interest rate risk despite a solid first half of 2014. Excerpted from Zach Pandl’s newest whitepaper Structural weakness in labor force participation means there is less slack in th…